easyJet profits nosedive as fuel gamble back-fires

easyJet's profits may be down 65% - but things probably aren't quite as bad as they may seem.

by
Last Updated: 31 Aug 2010

Admittedly, the headline number from easyJet’s latest results doesn’t sound great: full year profits plunged by 65% to £43.7m. However, this can largely be blamed on a badly timed punt on fuel prices – the airline ended up paying the best part of $1000 per metric tonne, when the market price was just under $600. And although it may still be lagging behind arch-rival Ryanair, easyJet is still making a profit at a time when most airlines are experiencing severe turbulence. So on closer inspection, it’s probably in a better position than that profit figure suggests.

Numbers-wise, today’s results were a mixed bag. Revenues were actually up 12.9% to £2.6bn, helping the company finish the year in the black (how other airlines, including BA, must wish they could say the same). There was good news elsewhere too, as easyJet increased capacity and market share at Gatwick, Paris, Milan and Lyon, after a successful campaign that targeted business customers. And as its ill-judged fuel deal comes to an end, easyJet will be able to take advantage of lower fuel prices – so next year’s figures are going to look a lot better in comparison. Harrison also seems to have resolved the very public and embarrassing spat with founder Stelios Haji-Ioannou over the airline’s growth strategy, so that’s one less thing to worry about.

However, there was plenty of bad news in there too. Passenger numbers may be up, but the year-on-year rise is (by some distance) the smallest in the company’s 12-year history. Equally, punters may not be too pleased to learn that this increase in revenue has been achieved via higher ticket prices and a rise in ‘ancillary’ income – a polite way of referring to extra money squeezed out via baggage charges, in-flight food and drink, and so on. And while it may be doing better than BA and co, easyJet continues to lag behind nemesis Ryanair in terms of both passenger numbers and profitability.

What’s more, Harrison is predicting ‘a tough winter ahead’ – so it looks likely that the airline will have to slash seat prices to tempt bargain-hunting customers, hurting profit margins. easyJet is hardly a basket case, particularly by the standards of the industry. But Harrison still has plenty of work to do to get the low-cost carrier flying again.


In today's bulletin:

Vince Cable demands windfall tax on banks
EasyJet profits nosedive as fuel gamble back-fires
Britain has too many pubs, says Enterprise
'The worst storm in real estate history'
Lady Geek: Is technology different for girls?

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Want to encourage more female leaders? Openly highlight their achievements

A study shows that publicly praising women not only increases their willingness to lead, their...

Message to Davos: Don't blame lack of trust on 'society'

The reason people don't trust you is probably much closer to home, says public relations...

Dame Cilla Snowball: Life after being CEO

One year on from stepping back as boss of Britain's largest advertising agency, Dame Cilla...

How to change people's minds when they refuse to listen

Research into climate change deniers shows how behavioural science can break down intransigence.

"Paying women equally would cripple our economy"

The brutal fact: underpaid women sustain British business, says HR chief Helen Jamieson.

Why you're terrible at recruitment (and can AI help?)

The short version is you're full of biases and your hiring processes are badly designed....